Investing in commercial real estate
INVESTING IN COMMERCIAL REAL ESTATE
Investing in commercial real estate can be difficult without the proper information, therefore it is crucial to gather the proper information to make an informed decision. Information that can be found in public records. Gathering financial information is also important because it allows the buyer to create financial models and bank proformas. Creating a business plan for development of the property. These three items are critical for investing in commercial properties.
Gathering public information is critical part in the investment process. Tax information can be used to create financial models and get information in regards to the property like building size and type of construction. FEMA flood maps are great information to determine if the property is prone to flooding. City and location information including demographics and traffic density will help in creating marketing plans. Collecting public records such as taxes, flood maps, and area demographics make it easier to get a complete picture of the property.
Other information that is needed includes financials of the property. This includes expenses for the property electricity, water, trash, management, and any other expenses associated with the property. For income producing properties a rent roll is important. This will help with finding what the debt coverage ratio is, cash on cash return, and Capitalization rate. If the property has no income public information can be used to create bank models. Financial information is the most important part of the investment process.
Putting together information including marketing information, photo on the property, floor plans, building survey, lease comps and sales comps are additional information on a property that is needed for financial institutions. Marketing information helps target potential tenants. Property photos keep records of improvements to the property and other changes to the property. Floor plans and building surveys give an over-all view of the property; and lease and sale comps verify rates for financial models and asking prices. These items are good for verifying information about the property and to make sure the information given is accurate.
Collecting the proper information takes the mystery out of investing in commercial real estate. Public records are available to any person and give great general information on the property. The important financial information is the back bone of the models allowing for a through financial understanding of the property. Additional information on the property completes the picture of the property. All of these help to limit exposure by anticipating issues, with proper planning.